It’s time for a Green New Deal

Larry Elliott wrote this in the Guardian newspaper yesterday:
Hammond has apparently given some licence by the prime minister to be radical with fiscal policy and should use it. Investment by the private sector has been weak since the Great Recession and is likely to be even weaker in the aftermath of Brexit. The government, therefore, needs [...]

Hammond has apparently given some licence by the prime minister to be radical with fiscal policy and should use it. Investment by the private sector has been weak since the Great Recession and is likely to be even weaker in the aftermath of Brexit. The government, therefore, needs to fill the gap.

There are two ways of doing this. The first involves the Treasury taking advantage of low interest rates to borrow for long-term investment. Not just in roads, railways and airports but in Britain’s digital infrastructure and its human capital. One of the country’s most glaring structural weaknesses is that the unemployment rate for young people who leave school with the most basic education is among the highest in the developed world.

An alternative approach would be to harmonise the activities of the Treasury and Bank of England, with the former issuing infrastructure bonds and the latter buying them up through its QE programme. This idea was floated by the Green New Deal group (of which I am a member) after the Great Recession, proposing a major programme of housebuilding and energy efficiency involving jobs for every UK constituency.

Jeremy Corbyn latched on to this idea, calling it People’s QE, when he was running for the Labour leadership, but he now appears less keen. This is a bit curious. A Green New Deal or People’s QE is something governments need to have up their sleeve when times get tough and they have run out of alternatives. Like now.